One of the oddities of looking at our export statistics in NZ is that one of the largest export sectors simply doesn’t show up. It is one that virtually didn’t exist 20 years ago when I started working in it. The amount of hi-tech exports in 1993 was more of a mirage than any kind of reality. That isn’t the case these days.
What our people are really best at is producing goods and services for vertical micro markets sold worldwide, and in a hell of a lot of those markets. What our land is good at is producing grass, but we have now exploited that to the point that all our rivers and aquifers are drying up.
It is pleasant that the Labour caucus, or at least David Cunliffe appears to have recognized that. He appointed himself to the position of the ICT, which is at the crucial core of many of the hi-tech export companies as part of their products. For instance Fisher and Paykel’s core selling point to other countries isn’t their hardware. It is in their their intelligent software embedded in the processors that control the hardware.
For a comparison consider the dairy industry’s inexorable rise mostly in selling milk powders. These stats are a bit old, but should give the idea about where dairy is growing and how fast it is growing.
| Export value ($NZm) | ||
| Product | YE June 2003 | YE June 2009 |
| Milk Powders | 2,602 | 4,950 |
| Butter | 944 | 1,693 |
| Cheese | 1,052 | 1,612 |
| Casein | 999 | 1,055 |
| Total all dairy | 5,807 | 10,402 |
| (Source: Statistics New Zealand) |
And the picture of where dairy is growing hasn’t changed much since then. The number of different products that they produce is very limited.
That causes vulnerabilities for the whole country as a recent milk contamination food scare over milk powder demonstrated.
The 2012 total for all dairy was just over $13 billion largely from increases in milk powder. If you look at the stats departments overview of exports. It looks like this.
| Commodity | NZ$ millions | Year end |
|---|---|---|
| Milk powder, butter, and cheese | 12,428 | 31-Dec-2012 |
| Meat and edible offal | 5,167 | 31-Dec-2012 |
| Logs, wood and wood articles | 3,160 | 31-Dec-2012 |
| Crude oil | 1,790 | 31-Dec-2012 |
| Mechanical machinery and equipment | 1,716 | 31-Dec-2012 |
| Fruit | 1,563 | 31-Dec-2012 |
| Fish, crustaceans and molluscs | 1,382 | 31-Dec-2012 |
| Wine | 1,218 | 31-Dec-2012 |
| Electrical machinery and equipment | 1,119 | 31-Dec-2012 |
| Aluminium and aluminium articles | 1,042 | 31-Dec-2012 |
| Casein and caseinates | 890 | 31-Dec-2012 |
| Iron and steel and articles | 874 | 31-Dec-2012 |
| Preparations of cereals, flour and starch | 917 | 31-Dec-2012 |
| Precious metals, jewellery and coins | 807 | 31-Dec-2012 |
| Miscellaneous edible preparations | 747 | 31-Dec-2012 |
| Optical, medical, and measuring equipment | 721 | 31-Dec-2012 |
| Wool | 717 | 31-Dec-2012 |
| Wood pulp and waste paper | 589 | 31-Dec-2012 |
| Raw hides, skins, and leather | 567 | 31-Dec-2012 |
| Textiles and textile articles | 560 | 31-Dec-2012 |
Source: Statistics New Zealand
Which is pretty much what this current government tries to sell us as being to the rest of the world.
What we do the best is being an exporter of lightly processed raw materials to the rest of the world, with a light leavening of mechanical and electrical machinery. But that really isn’t the case. That is an artifact of the stats department’s rather antiquated classification system that appears to be designed for the 19th century.
Consider the revenues for our top tech companies from the TIN100 report in 2012. This restricts itself to companies that
▶ Originate in New Zealand
▶ Retain a meaningful presence here in New Zealand
▶ Operate in the high-tech manufacturing, ICT or biotechnology sectors (excluding food technology and health supplements)
▶ Have developed their own technology-based intellectual property
▶ Generate at least 10% of their revenues offshore
While these are revenues and is not just exports, this country will only make up a fraction of the revenues of these companies. With just a population of 4.4 million that is inevitable. Almost every hi-tech company gets the majority of their revenue from exports to larger markets.
The total for 2012 was revenues of about $7.28 billion of which $5.18 billion was from exports, and this was just the top 100 or even 200 companies.
The company that I’m currently working for isn’t in there. Indeed none of the firms that I’ve worked for in the last decade have been in there. But even if you only look at the top 100, you’ll find that they have a growth rather that is usually considerably faster than dairy or any other primary production. They also employ more people at higher wages than any other sector than any extractive industry like farming or mining.
So why since National got into government have they cut virtually any incentives for startups to grow? Putting minimal effort into helping tech firms offshore has paid off massively since Helen Clark’s government started it soon after coming to power in 1999. But National cut everything, leaving behind some high sounding phrases, no real incentives for smaller startup companies, and not much significiant support offshore as McCully trashed our existing systems.
Sure Steven Joyce ambles along to tech conferences and big notes with meaningless phrases, but he hasn’t provided any of the tools that government can provide for small companies trying to make that expensive and scary step to find markets offshore. As head of MOBIE, about the only economic development he seems to want to foster is extracting money from land and sea – unsustainably. So why is that?
Well in my view National are *the* party of lazy parasitical rentiers rather than producers. They lease and sell land for farming and mining because that way you have to do less work.
Rather than making an effort to foster lots of smaller firms and getting them to become bigger firms, they like to wave the big notes around that are easier to do. So we get the Fonterra welfare trade agreement that sells out local tech exporters of intellectual property – merely so Fonterra gets easier access to a few markets.
With the clear direction of David Cunliffe’s self-appointment in the heart of the tech sector, it looks like Labour have again chosen to foster high wage employment over National rentiers. Another clear political difference for the election in the area of doing what we’re good at….
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